Averting the next bailout

•The problem is not funds per se; government must make the business environment friendly

NOTHING exemplifies the dilemma facing the Federal Government than its latest round of lifelines to the two beleaguered but key sectors of textile/garment and aviation. We refer to the latest package of N51 billion in the 2017 budget for the textile and garment sector announced by the Minister of State for Industry, Trade and Investment, Aisha Abubakar, at a workshop organised by the Bank of Industry (BoI) for operators. The other is the expected injection of N10 billion into Arik Air, sequel to its takeover by the Asset Management Corporation of Nigeria (AMCON), last week.
At this time, the question on the lips of Nigerians must be: what has changed in the two sectors to warrant the expectations that things will be different with fresh injection of funds? This is against the background of a similar package of N150 billion sunk under the successive Peoples Democratic Party (PDP) administrations into bailing out the textile/garment sector. We refer specifically to the N100 billion Cotton Textile and Garment Revival Scheme initiated by the Obasanjo administration and sustained by the succeeding PDP administrations, and the N50 billion fund initiated by the BoI to facilitate the takeover of the existing debts to provide additional long-term loans and working capital to existing companies in the Cotton, Textile and Garment (CTG) sector.
On the latter, the latest information from the acting Managing Director of Bank of Industry (BoI), Waheed Olagunju, is that, “A total of N13.37 billion has been disbursed to various beneficiaries as at September 30, 2016.”
After gulping a whopping N150 billion intervention funds in the last decade, our expectation is that the sector would have by now, been on a steady path of growth; that another round of bailout is being contemplated would seem to suggest that something more fundamental – more than the issue of funds – needs to be addressed.
The story is no less similar for the aviation sector. That a sector which only a few years ago was also offered lifeline of N500 billion, of which N120 billion was later disbursed has remained in distress obviously points at complex factors in the environment. The story is that a meagre N39.5 billion of this has been recovered; the rest – N81.2 billion apparently gone down the drain. The beneficiary companies – Air Nigeria (now defunct), Chanchangi Airline (defunct), Kabo (defunct), Overland, First Nation, Arik and Odengene, each reportedly got between N15b to N35.5b loan have all failed to make good on their obligations.
We understand the imperatives which have made the intervention necessary. More than just the need to prevent a further relapse and hemorrhaging of the economy, and to ensure that jobs are preserved as far as practicable, the two sectors are not only critical but strategic. The cotton and textile sector was, from the 60s to 80s, the second largest employer of labour after government. At the height of its boom between 1985 and 1991, it had about 180 textile mills in operation, recording an annual growth rate of 67 per cent and as at 1991, employed over 350,000 people – approximately 25 per cent of workers in the manufacturing sector.
Even now, its potentials as a mass employer of labour are far from diminished. The same is true of Arik Air: at the moment, not only does it account for 55 percent of the local aviation services, its debts to local financial institutions, put at a staggering N310 billion, constitutes a systemic risk to the financial services sector – were it to go under.
The measures, in any case, underscore the new resolve of the Federal Government to give the economy the much-needed shot in the arm.
The challenge really is to make the intervention work; to ensure that the funds are not diverted for other purposes other than for those they were meant. Considering that the operating environment continues to prove a graveyard of many businesses, the greater challenge is for the Federal Government to work assiduously to improve the environment for doing business. That is the surest way to prevent the next bailout.